Dispatches from The Hill | January 2015

This issue contains:
  • FY15 Appropriations Process and Tax Extenders Package;
  • Updates by AGree Initiative;
  • Anticipated Agriculture-related Activity in the 114th Congress;
  • Congressional Environment;
  • Likely Legislative Issues by Relevant AGree Initiative; and
  • Other Relevant Bills.

FY15 Appropriations Process and Tax Extenders Package

Congress returned from the fall election on November 12, 2014, with a lot to accomplish but relatively little time to do so. The priority was to address Fiscal Year 2015 (FY15) appropriations, since the federal government was operating under a Continuing resolution (CR) due to expire on December 11. The staff of the House and Senate Appropriations committees had been working steadily over the fall recess, hoping to give the Committee leadership a complete set of 12 appropriations bills which could be passed as a package by the deadline.

The following week, those expectations took a big jolt, after President Obama announced his Executive Actions on immigration, which would offer as many as 5 million undocumented immigrants relief from deportation for up to 3 years, taking the position that Congress had failed to act to fix the U.S. immigration system and he would take steps to address problems within the scope of his authority. That decision was met with widespread condemnation by elected Representatives from the Republican Party, who asserted that his actions were unconstitutional. Consequently, the Republican majority in the House delayed action on FY15 appropriations while trying to determine if they could take any steps in the bill that could invalidate the President's immigration moves.

After considerable internal debate, Congressional leadership decided to proceed with a bill that would provide funding through September 30, 2015 (end of FY15) for the programs and agencies under the jurisdiction of 11 of the subcommittees, leaving funding for the Homeland Security Subcommittee's programs, which includes the agencies charged with enforcing immigration law, on a short leash, expiring in February 27, 2015. The Republicans' hope is that with control over both the House and Senate in the new Congress, they can come up with a way to legislate changes to the President's immigration plans.

That bill, termed a 'CRomnibus' because it combined elements of a short-term continuing resolution (CR) and an omnibus, was passed by Congress and signed by the President after some delays resulting from dissatisfaction with some of the items contained in the bill, primarily concerns raised about legislative riders rather than appropriations levels for specific programs or agencies. Overall FY15 funding was established by the Bipartisan Budget Act passed late in 2013, so most programs were flat funded compared to FY14.

In addition to the CRomnibus, Congress also enacted a 'tax extenders' package with several provisions that affect U.S. Agriculture. This bill extended an array of tax incentives for the 2014 tax year, but did not extend them for 2015.

The key agricultural provisions in both bills are described below, organized by AGree Initiative. Key legislative/policy developments in these areas outside the two main bills are also described.

Updates by AGree Initiative

Working Landscapes
As has often been the case in recent years, the House and Senate Agricultural Appropriations Subcommittees reduced access to key USDA mandatory working lands conservation programs in order to generate savings to fill gaps in available funds for other USDA programs that are subject to appropriations. The FY15 bill cut spending for the Environmental Quality Incentives Program (EQIP) by $136 million and cut the acreage cap for the Conservation Stewardship Program (CSP) by 2.3 million acres, generating only $7 million in savings for other programs in FY15 but resulting in a reduction in CSP spending of an additional $395 million over the next ten years.

The bill also included legislative riders which affect this area of agricultural policy – it requires USDA to withdraw proposed rules governing contractual relationships between livestock and poultry producers and the large meat and poultry integrators which dominate that sector of agriculture, and requires the Environmental Protection Agency (EPA) to withdraw the interpretative rule that attempted to clarify eligible agricultural practices under the proposed changes to the Clean Water Act that was objected to so strenuously by many farm groups, which prompted the American Farm Bureau's 'Ditch the Rule' campaign.

The CRomnibus also instructed the Secretary of Agriculture to propose legislative fixes to the meat and livestock Country of Origin (COOL) laws, which have been found inconsistent with WTO rules in a long running dispute with the governments of Canada and Mexico, although these instructions were included in report language, and are thus not legally binding. Similarly, report language also instructs the Secretary to forego his plans to establish a second beef check off program, which the Secretary had explored after waiting several years for beef sector interest groups to address identified problems in the existing beef check off program.

The tax extenders included an extension to Section 179 'bonus depreciation' rules, which will allow farmers to take longer to depreciate new or used farm equipment valued up to $500,000, and new equipment or structures valued at up to $2 million, rather than the $25,000 limitation that would have otherwise be in place for the 2014 tax year. The package also extended tax credits for biodiesel production through 2014.

Food & Nutrition
Opponents of the school nutrition rules established under the 2010 Healthy and Hunger-Free Kids Act failed to get the broad-based waiver authority they had been seeking in the FY15 appropriations bill but did get a more narrow waiver with respect to inclusion of whole grain products in school menus after complaints about the inability to obtain such foods in some parts of the country. In addition, USDA was told to hold off the implementation of restrictions on sodium content in school meals until they could provide more rigorous scientific justifications. In addition, USDA was barred from restricting WIC recipients from purchasing white potatoes. All of these provisions were included as riders in the CRomnibus bill.

The bill includes $6.6 billion for the Women's, Infants, and Children Program (WIC), $93 million lower than for FY14 but sufficient to meet expected program demand. WIC is the main nutrition safety net program which is subject to annual appropriations. The other major programs (SNAP, TEFAP, school lunch, etc.) receive mandatory funding.

International Development
The main international food aid and food security programs received decent funding levels for FY15 – the Title II 'Food for Peace' food aid program got $1.466 billion, an increase of $66 million over FY14, and the McGovern-Dole international school feeding program received $191 million, an increase of about $6 million over FY14. The bill did not include authority for USAID to use $35 million of Title II funds to cover cash expenses rather than buy commodities (as did the FY14 bill), and contained no funding for the new local and regional procurement (LRP) program authorized for USDA by the 2014 farm bill.

Cargo Preference: Humanitarian NGO’s and USAID, with the help of key champions on Capitol Hill, were able to fight off efforts by the U.S. maritime industry to make cargo preference rules which govern the use of U.S.-flagged vessels to carry U.S. food aid more onerous and thus more costly to meet.

Section 318 of the original House bill, H.R. 4005 (passed in the House back in April), would have increased from 50 to 75 percent the portion of U.S.-sourced food aid commodities that must be transported on privately owned, U.S.-flagged commercial vessels, increasing transportation costs by $75 million. The increase in the cargo preference requirement for food aid was dropped in the later version of the House bill (HR.5769). Sections 316 of the original bill and a similar provision (Section 321) in H.R. 5769 would have allowed the Secretary of Transportation to apply cargo preference rules on programs run by other departments and agencies without their consultation, severely limiting transparency and oversight of cargo preference enforcement.

After HR. 5769 passed the House on a lopsided vote, Senators Bob Corker (R, TN) and Chris Coons (D, DE) were able to stall the effort to pass the bill in the Senate at the end of the lame duck session and forced the bill sponsors to remove Section 321 before they would allow it to pass the Senate.

The exclusion of these provisions from final legislation preserves recent improvements in U.S. international food aid programs, ensuring at least 2 million vulnerable people will not lose access to life-saving food aid from the United States. Additionally, it maintains fair and transparent application of cargo preference rules that incorporates consultation with agencies and NGOs that implement food aid programs around the world.

Global Food Security Legislation: On November 20, Chairman Henry Royce marked up a modified version of the Global Food Security Act (HR.5656) in the House Foreign Affairs Committee, and it was reported out of the Committee on a voice vote. The main changes were to reduce the authorization for appropriations under the bill to one year and to bring some of the specific language in the bill more in line with the Senate version. On December 10, the bill was considered by the full House as part of the suspension calendar, and adopted on a voice vote. There was an effort to pass the modified version of HR.5656 in the Senate at the end of the lame duck session, but that process was unsuccessful.

Research & Innovation
The largest competitive agricultural research program, the Agricultural Food and Research Initiative (AFRI) received $325 million for FY15, an increase of $9 million over FY14 levels, $45 million to begin renovation work at ARS facilities around the country, many of which were originally built in the 1950's and 1960's. The CRomnibus bill also exempted AFRI grants from a matching fund requirement applicable to other USDA research grants, established in the 2014 farm bill.

Immigration Reform
While some undocumented farm workers are expected to qualify for temporary relief from deportation under the criteria established by the President in his November 20 announcement of Executive Action (up to 250,000 immigrants, it will still leave farmers in many parts of the country short of the stable labor force they need. More details are needed before it can be determined if the new rules to provide better access to U.S. jobs for foreign graduates of U.S. universities will address the need for skilled workers by agricultural manufacturing firms. In order to fully address the problems with the current U.S. immigration system that affect the agricultural sector, Congress will have to take legislative action.

Next Generation
The CRomnibus bill provided good funding levels for the Farm Service Agency direct ownership and operating farm loan programs for FY15, nearly tripling recent levels for these programs. This bump-up will allow the Agency to clear a substantial share of the current backlog of applicants, many of whom are young and beginning farmers who receive preferential access to these loan programs.

It did not provide any funds for the Beginning Farmer and Rancher Individual Development Account (IDA) program, which was authorized in the 2014 farm bill. This program was designed to encourage young people to save to buy land and equipment for farming, by providing a federal match to funds saved.

Local Food
In early December, the White House announced grants totaling $800,000 to 26 small communities around the country as part of their Local Foods, Local Places initiative. The funding will provide technical assistance to rural communities to help them build strong local food systems. This initiative was announced in June 2014, and the first round of grants were finalized and announced in December. This effort is being run cooperatively by 6 different federal agencies or entities (USDA, EPA, Department of Transportation, the Delta Regional Authority (DRA), the Appalachian Regional Commission (ARC), and Centers for Disease Control) under the aegis of the White House Rural Council.

Also in December, USDA announced allocation of $5 million in grants to schools in 42 states and the U.S. Virgin Islands to connect school cafeterias with local farmers and ranchers under the Farm to School Program. USDA also announced 8 states that would participate in the Pilot Project for Procurement of Unprocessed Fruits and Vegetables, to help schools in those states purchase locally produced fresh fruits and vegetables for their school meals programs. The latter project was authorized by a provision of the 2014 farm bill.

Risk Management
In November, USDA's Risk Management Agency finalized rules for the Whole Farm Revenue Protection (WFRP) insurance product, thus making it available to farmers for their 2015 spring-planted crops. Although technically a pilot program, it will be offered to farmers in nearly every state, with the exception of states in the southern plains and Delta region (TX, AR, LA, OK, and MS). Farmers can obtain WFRP if they grow at least 2 crops on their farm, although the top coverage level of 85 percent is available only to farmers who grow 3 or more crops.

Farmers seeking this coverage must finalize its purchase by the sales closing date for spring-planted crops in their region of the country – February 28th in the south and March 15th in the rest of the country.

Also in November, RMA finalized rules for allowing farmers of spring-planted crops in 2015 to drop catastrophic yields from their Actual Production History (APH), a calculation which determines the yield at which farmers are allowed to insure their crops. Winter wheat producers had been unhappy that the provision was not implemented in time for their crops planted during the fall of 2014 and had threatened to sue USDA for its failure to do so.

In December, the Farm Service Agency announced that farmers growing crops eligible for insurance under the Non-Insured Crop Disaster Assistance Program, or NAP, would now have access to higher coverage levels than previously available. NAP is available to cover crops which have no policies available under the federal crop insurance program. Previously, farmers could only cover such crops with a NAP policy that paid out only when losses exceed 50 percent of expected production at 55 percent of the expected market price (50/55) for a nominal service fee. Now, farmers can obtain NAP coverage that pays out with losses at 35 percent or more, at 100 percent of the expected market price (65/100). Farmers covering crops with the enhanced NAP coverage will pay a premium for the policy in addition to the service fee.

All of these changes to the federal crop insurance program and NAP were mandated by provisions of the 2014 farm bill.

Anticipated Agriculture-Related Activity in the 114th Congress

Congressional Environment
In the 114th Congress, the Republican Party controls both the House and Senate for the first time since 2006. Potential agricultural policy changes will have to come through some sort of bipartisan process to become law.

Both the House and Senate Agriculture Committees will have new leadership – in the House, Rep. Mike Conaway (R, TX) takes over from Rep. Frank Lucas (R, OK) as chairman, who was term-limited under House GOP conference rules. Rep. Collin Peterson (D, MN) stays on as ranking member for the Committee. In the Senate, Senator Pat Roberts (R, KS) will take over as Committee chair, while Senator Debbie Stabenow (D, MI) moves to the ranking member slot.

Much of the potential legislative action that could impact U.S. agriculture would fall under the jurisdiction of committees other than the House and Senate Agriculture Committees. These Committees include Senate Finance and House Ways and Means, which are to be taken over by chairs who have not been active regarding agricultural policy in the past. The new House Ways and Means Committee chair will be Rep. Paul Ryan (R, WI), who was willing to put both commodity and nutrition programs on the chopping block in his budget proposals when he chaired the House Budget Committee. As to Senate Finance, the new Chairman is Senator Orrin Hatch (R, UT), taking over from Senator Ron Wyden (D, OR), who moves to the ranking member slot.

Likely Legislative Issues by Relevant AGree Initiative

Working Landscapes
Trade Promotion Authority: As the Obama administration makes progress in negotiating two major regional Free Trade Agreements, with Pacific Rim countries (the TPP) and with the European Union (TTIP), the President is expected to press Congress to grant him Trade Promotion Authority (TPA) that would enable final deals to be considered by Congress without allowing members to amend the terms of the deal. This area is one in which there is the possibility of agreement between the President and Congressional GOP leadership, but it will face opposition from Tea Party-affiliated Republican members, who don't want to concede anything to President a Obama and liberal Democrats, who believe that FTA's lead to U.S. job losses. Most U.S. Farm groups support these 2 FTA's as they anticipate increased exports to result. This legislation would be handled by the Senate Finance and House Ways and Means Committees.

Renewable Fuels Standards (RFS) Legislation: After the EPA's effort to reduce the RFS administratively for 2014 stalled, there is likely to be an effort to repeal or modify the Renewable Fuel Standards legislatively during the 114th Congress. This would face strong opposition from Midwest members from both parties. This legislation would be handled by the Senate Environment and Public Works Committee and the House Energy and Commerce Committee.

Clean Water Act rulemaking: The CRomnibus bill required EPA to withdraw its interpretative rule on agricultural activities associated with its rulemaking process on the Clean Water Act, but at this point, EPA plans to proceed with the rule itself. The public comment period closed in November. The new Congress may try to halt or overturn the new rule before it takes effect using the provisions of the Congressional Review Act, but would have to do so over the expected veto of the President.

Food & Nutrition
Child Nutrition Act: There is one piece of farm policy legislation which must be addressed in 2015, the reauthorization of the Child Nutrition Act, which provides the structural and funding authority for the school meals programs, WIC, and related programs. The work on this bill will be done by the Agriculture Committee in the Senate but the Education and Workforce Committee in the House. Despite the fact that the last such bill, the Healthy and Hunger Free Kids Act of 2010, passed with a strong bipartisan vote, many of the nutritional guidelines it contained are now opposed by many as overly intrusive.

GMO labeling: Congress may take up a GMO labeling bill that would establish national standards as to how to label GMO content on food packages, in an effort to forestall disparate state laws in this area. This legislation would be handled by the House and Senate Agriculture Committees.

SNAP: The new House Agriculture Committee chairman has committed to undertaking a thorough review of the Supplemental Nutrition Assistance Program (SNAP) as one of his top priorities in the new Congress, with an eye toward reducing spending on the program by improving its efficiency. However, the new Senate Agriculture Committee chair has also said publicly that he does not intend to re-open the 2014 farm bill, so it is not clear how far the House efforts can go.

International Development
It is anticipated that the Obama Administration and its allies will quickly reintroduce food security legislation in the new Congress. They will have to identify a new Republican lead sponsor in the Senate, as Senator Mike Johanns (R, NE) has retired.

Immigration Reform
While a comprehensive immigration deal seems unlikely given the Republican reaction to the President's Executive Actions in November, there is some possibility that the House and Senate could take up the piecemeal approach originally proffered by Speaker Boehner in 2013. A stand-alone bill addressing farm immigration issues could be considered on this basis. This legislation would be handled primarily by the House and Senate Judiciary Committees.

Other Relevant Bills
Finally, it is possible that Congress could consider pursuing budget reconciliation and/or comprehensive tax reform during the 114th Congress. While not targeted at U.S. agriculture, both could impact the sector, as every Committee would be obliged to cut spending under reconciliation instructions, and tax breaks and tax expenditures enjoyed by farmers and/or agribusinesses could be on the table for modification or elimination in a broad-based tax reform deal.